Passmore, Wayne; Sherlund, Shane M.; Burgess, Gillian - Federal Reserve Board (Board of Governors of the … - 2005
We derive a theoretical model of how jumbo and conforming mortgage rates are determined and how the jumbo-conforming spread might arise. We show that mortgage rates reflect the cost of funding mortgages and that this cost of funding can drive a wedge between jumbo and conforming rates (the...